While there’s no lack of evidence to prove that investing in the market has the potential for good return, it needs to be understood that it is still a speculative venture (which means you can lose all your money).  ‘Money in the market’ is composed of any vehicle that depends on ownership of either stocks or bonds or mutual funds for performance.  There is potential for competitive returns, but the risk is there too.  The usual strategies of broad asset class diversification and dollar cost averaging may lessen the market’s volatility, but market loss risk is mitigated at best.  Mutual funds spread out the risk through diversification of what product you own, but it’s still only risk mitigation.  Due to its good upside potential, ‘Money in the market’ should be part of an investor’s overall strategy, but do we want it all there?

      ‘Money using the market’ offers the investor the opportunity to harness the earnings power of the stock market without having to own any stocks, bonds, or mutual funds.  There are equity indexed vehicles that allow for the realization of positive market swings, but the downside market risk is minimized.  The principal in these accounts is not invested and has reduced risk of loss due to no market risk exposure.  While these vehicles may not perform as well as direct investment in the stock market, they aren’t subject to the losses that occur.   Even though this is less risky, do we want all our money here?

     The third component of Intelligent Diversification, called ‘Money out of the market’, is composed of the investments that utilize real estate, collectables, and non-liquid investments.  This can also include cash or gold.  Since all markets have their own ‘boom-to-bust’ cycles, why not have some of your money here?  Real Estate can bring stability and growth potential to your portfolio, and some collectables bring a very good return on your investment.  Gold is generally considered to be good in tumultuous times and can be a hedge against inflation.  There are many long-term opportunities with non-liquid investments, which might be considered for inclusion in your portfolio.

     Intelligent Diversification can allow the client the potential to build wealth via different vehicles which could be accessed at need (or want) when they are at their strongest.  If your mutual fund account is down due to poor market performance, you should leave the money in it until the market recovers and pull money from either the ‘money using the market’ or the ‘money out of the market’ accounts, whichever is the most advantageous to pull money from.  Why buy high and sell low? 

     Texas Hill Country Financial Services provides many of the products for the three components of the Intelligent Diversification strategy, including but not limited to:  fee-based asset management, non-tax-deferred mutual fund accounts, Roth’s, traditional IRA’s, SEP’s, Simple’s, 401(K)’s, annuities, cash value life insurance for personal or business usage, Equity Indexed annuities and life insurance for personal and business usage.  Please remember that a product without a plan is not conducive to financial success.  Texas Hill Country Financial Services believes there may be more than one strategy or product for you. The financial planning process is the first step to moving in the right direction.  We use process and then product to create the right financial engine for you.  Also, Texas Hill Country Financial Services employs strategic alliances with other firms and individuals for its clients’ welfare.  Accountants, lawyers, realtors, and others are available for your utilization. 

Please contact John C. Stults at txhcfs@aicinvest.com or 830/833-0848 for an appointment.

Securities and investment advisory services offered solely through Ameritas Investment Corp. (AIC). Member FINRA/SIPC. AIC and Hill Country Financial Services are not affiliated. Securities products are limited to resident of Texas. Additional products and services may be available through Texas Hill Country Financial Services that are not offered through AIC.

This is not an offer of securities in any jurisdicton, nor is it specifically directed to a resident of any jurisdiction. As with any security, request a prospectus from your Registerd Representative. Read it carefully before you invest or send money. A Representative from Texas Hill County Financial Services will contact you to provide requested information.

Representatives of AIC do not provide tax or legal advice. Please consult your tax advisor or attorney regarding your situation.